Singles swing into retirement with little savings

Study: Couples are more successful in saving

If you think it’s hard saving for retirement as a couple, trying doing it as a single. According to a study—described by one expert as the most intriguing of 2012—the amount of money singles in their late 60s have saved up for retirement is dramatically less than that of married-couple households.

In fact, the median married household had in 2008 nearly 10 times more saved up for retirement than the median single-person household, $111,600 vs. $12,500. (Savings, for the record, included 401(k)s and IRAs and all taxable savings and investment accounts, but it did not include Social Security, pensions, or housing wealth. And single, at least for the purpose of this research could mean divorced, widowed or unmarried for most/all of their life.)

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The difference was also extreme at the extremes, according to a blog post by Steve Utkus, who oversees the Vanguard Center for Retirement Research.

In his review of the study, Utkus noted that the top 30% of married households had savings of $332,400 or more while the top 30% of single-person households had just $90,000 or more. The bottom 30% of married households, meanwhile, had less than $24,000 saved while the bottom 30% of single-person households had less than $800.

Why the sharp divide?

According to Utkus, divorce is one reason why older single households have less money. When a couple separates, assets are divided, and savings can fall due to legal and other costs.

But divorce isn’t the main reason for singles having less money. If that were the case, Utkus wrote, he’d expect single-person figures to be just under half of those for married couples. But the gap is much wider than that. To be fair, the study doesn’t reflect the value of housing wealth which often becomes part of a divorce settlement, so it’s possible that the gap is not as wide.

The early death of a spouse is another reason why single households have less money than married households, according to Utkus. The all-too-familiar situation goes something like this: “One spouse, often the working male, becomes sick in his 50s or early 60s, loses work, and then dies prematurely,” he wrote. “The healthier spouse, often the female, may have a lower income or may not be working. She spends savings on living expenses and her husband’s medical costs. The loss of savings accelerates if they lose health insurance. Long-term care such as a nursing home can also accelerate the loss of assets. Medicaid, which can be used to pay for nursing care, doesn’t kick in until the household depletes most of its savings.”

And being single for most if not all of one’s life is yet another reason why single households have less money than married households. “When you live alone, you don’t benefit from the economies of scale of sharing costs with another person in the household, and so you may save less over your lifetime for a given level of income,” Utkus wrote. “If you lose your job, you don’t have the self-insurance that comes from having another household member with income and health benefits.”

So what lessons can be drawn from the findings? In general, if you’re single you’ll need to accumulate much more in your nest egg than your married counterparts, according to Utkus.

Plus, you need to make sure you have the right kinds of insurance in place. “You need also to protect against large, unexpected claims,” he wrote. And that means, having disability, life, and health insurance. “The new health care act may help when you lose workplace coverage—but of course you’ll still need to buy a policy,” he wrote.

But what one does to counteract the risks of being single depends also on the nature of the household.

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